Monday, August 10, 2015

It's Still The Economy, Stupid........ A MUST READ!

It's Still The Economy, Stupid

We're regularly told by the Fed and defenders of the current incumbent president that the economy is humming along pretty well. Yes, there are concerns, we are told, the US is performing below its "potential output" level, but we've achieved the most that can be expected under the circumstances. People who write columns for the New York Times and who compile government reports are doing pretty well. Unfortunately for those who don't write columns or enjoy comfortable government jobs, things seem less rosy.

In fact, in an economy with a rising cost of living (especially in housing), stagnant real wages, and falling worker productivity, many in the so-called working class are very, very worried about the future.

And this, The Washington Post reports, is a reason that Donald Trump is doing so well in the polls:

In a recent Washington Post/ABC News poll, Trump won support from nearly a third of Republican voters and Republican-leaning independents without college degrees, compared to just 8 percent of Republican college grads. (That education gap has been smaller, but still prevalent, in other surveys.)

Non-college grads have struggled since the turn of the century: Economist Robert Shapiro estimates that incomes stagnated or declined from 2002 to 2013 for American households headed by workers without a degree, a marked departure from prior decades.

A CBS poll this week showed more than 7 in 10 Republican voters are confident in Trump's economic decisions, well above any other Republican candidate.

We know that in the current economy, workers with college degrees have a much lower unemployment rate than workers without college degrees. Thus, we could extrapolate from this demographic data that workers with less secure employment tend to favor Trump more than those who feel secure in their jobs.

Trump has hit on the tried and true strategy that got Clinton elected in 1992: "It's the economy, stupid." The economy isn't doing nearly as well as the educated and elite groups think it is, and the lower end of the economic spectrum knows it. Thus, Trump, who is one of the few candidates willing to speak radically on the issue, is getting a lot of support from those groups.

Like Clinton, however, Trump is unfortunately offering the wrong remedy to the problem. Slapping huge tariffs on imports and micro-managing the labor supply via immigration controls won't create economic growth, bring down unemployment, or spur entrepreneurship.

But who's offering any other alternative remedy?

Most Republicans want nothing more than mild tinkering with the economy. They want to "fix" Obamacare or maybe reduce taxes a little (while increasing deficit spending). And the central bank is off limits. So, anyone who's actually concerned about his economic future just yawns. The Democrats, constrained by being the party in power, must simultaneously claim that things are good, while also calling for just a little more of what's already been happening the last eight years.

Thus, it's easy to see why Trump looks good to many by comparison. It would be nice to see a candidate come out for large-scale repeal of government regulations, taxes, and other measures against what's really hobbling the economy. But, that would upset the interest-group apple cart too much, and be political suicide. So it's back to targeting foreigners and foreign countries.